Immigration - the Other Shoe

If you have been paying attention to all of the turmoil in the financial markets lately, I would like to direct your attention to immigration.

Regardless of how you feel about immigration on a personal level, the policy that the US takes on this issue will have a huge effect on our economy as a whole.

The recent storm in the financial markets was blamed directly on the subprime lending activity that helped to fuel the US housing boom. As has been said, many housing markets now have blood in the water, and depending on what happens with immigration, it could get a lot worse.

Consider that on a global scale, the US has to compete with countries like China and India. Technically, they can't beat us. But one of their huge advantages is a cheap labor force. The fact that they have so many people willing to work for low wages allows them to produce cheap goods that are difficult to compete with.

I don't know the exact figure, but I think China had a trade surplus of 26.9 billion dollars? That is a direct result of being able to produce products inexpensively.

Now, lets look at the US.

US workers are expensive. Compared to China and India, US salaries are high. When you have to pay your people more, you have to charge more for your products and services. As a result, prices go up.

Illegal immigrants... unauthorized workers. Whatever you want to call them. They have the opposite effect. Because they are willing to work less, they have a deflationary effect on the cost of goods and services in the sectors that they are involved in. That means, they make those things cost less.

Let's start bringing it together by looking at housing.

Illegal immigrants make up a large percentage of the workforce in housing. According to professionalRoofing.net, "...93,000 roofing workers—29 percent of the 325,000 roofing work force—were unauthorized, and unauthorized workers make up about 14 percent of the total construction industry work force."

29 percent of roofers are unauthorized. One in three.

Now, imagine what would happen if you had a business, and you had to fire every third employee. That would be devastating. Would you even be able to continue operating as a going concern? Where would you find qualified replacements? And what would the effect be if you had to pay that replacement considerably more?

NOTE - I'm not talking morality here. I am not talking about the rightness and wrongness of paying someone a specific wage, their feelings, the legality of it all, or any of that. What I am concerned with here are the practical effects that legislation might have on the status quo.

This is what I'm interested in - What is really happening right now, and what will happen if that changes?

Well, that's easy. Prices will rise. Production will slow. And the already battered housing market will take another huge hit.

How does this relate to the rest of the world? Well, if you consider that much of the asswhup in the markets lately has been blamed on US subprime lending, you can see that events in the US Housing market do have repercussions for the rest of the world.

And since immigration reform has such massive implications for the US housing market, it is something that bears watching.